Easwaran Kanason

Co - founder of NrgEdge
Last Updated: July 31, 2019
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Business Trends

Barely hours before the deadline, Chevron received word from the US government that it would be allowed to continue operating in Venezuela. The original 6-month waiver from the US oil embargo against the South American nation was due to expire on July 27, and with little time to spare, the Trump administration finally agreed to extend it but only by 3 months.

Chevron, along with US service firms Halliburton, Schlumberger, Baker Hughes and Weatherford International – can now continue to operate legally in Venezuela until October 25. As a reprieve, that isn’t much. A mere waiver extension of 90 days will do little. Not long enough to stabilise the situation, but not short enough for major repercussions.

But at least for now, Chevron will be breathing a sigh of relief. The lone major US oil company still in operation after ExxonMobil and ConocoPhillips made a costly flee when Hugo Chávez nationalised the oil industry, Chevron raised some eyebrows as it curried favour with the Chávez government. At stake were crucial shares in key oil fields, including the vast Orinoco Belt  and future opportunities in the country with the world’s largest proven reserves that exceed even Saudi Arabia. The vacuum left by ExxonMobil and ConocoPhillips was filled by Russia’s Rosneft and China’s CNPC, who receive crude shipments through complicated oil-for-loan deals. But Chevron is still holding on, supported mainly by Halliburton.

The main risk cited by Chevron as it lobbied for the waiver’s extension was that the assets it would be forced to give up would likely fall into the hands of Russian and Chinese firms, which would wipe out institutional American oil influence in the country. These fears appealed to the America First slant of the Trump administration, but only just. The necessity of the waivers was balanced against impatience to bring down the government of Nicolas Maduro. According to inside sources, Trump thought Maduro would cave in immediately following the sanctions; that this did not happen is a badge of embarrassment and the White House is apparently in no mood to capitulate and wants to force regime change soon.

Central to this equation is what the Venezuelan opposition, which the US recognises as the current legitimate government of the country will do. And Juan Guaido, the de facto leader of the National Assembly, has already announced that Chevron’s assets in Venezuela would be protected under his government. In other words, if Guaido became President, then there would be no problem. Russia and China wouldn’t be allowed to steal American oil interests from Chevron. But that is a big if. Guaido and his allies have already tried once to seize control, garnering international support for their cause but were repelled by Maduro and his incumbents. But pressure is still being applied, and the short tenure of the waiver could be seen as a sign that the US believes the Maduro regime will fall very soon.

And if it does, then Guaido would owe the US favours. And the price for US support is steep. Many American oil industry executives still remember the days of Venezuela’s ‘apertura petrolera’ period in the early 1990s, a golden age for US oil interests in Venezuela. In 1999, however the internationally-minded Rafael Caldera was replaced by leftist Hugo Chávez and those policies reversed, essentially kicking all US oil interests out of Venezuela. All, that is, except for shrewd Chevron. The battle waged by Trump’s White House is a war to return Venezuela to a pre-1999 state far more receptive to US influence. The question of which side will prevail is still up in the air, but for now, Chevron doesn’t have to choose a side yet.

Chevron's assets in Venezuela: 

  • Four joint ventures with PDVSA (supported by Halliburton)
  • Assets include: the Boscan field in Zulia state, the LL-652 field in Lake Maracaibo, the Huyapari field and the Carabobo 3 project in the Orinoco Belt
  • Estimated production: 200,000 b/d, of which 25% goes to Chevron

Read more:
venezuela pdvsa conocophilips exxon oil sanction USA chevron Orinoco trump Guaido
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